Method and system for using credit lines to enhance the durability of securities portfolios

ABSTRACT

A system and method for determining a desirous funding source and/or sources based upon at least one of user information, home information and portfolio information, wherein said desirous funding source(s) is/are based, at least in part, upon maximization of a user&#39;s assets.

CLAIM OF PRIORITY

This application claims the U.S. Provisional Application No. 60/707,119,filed Aug. 9, 2005 and U.S. Provisional Application No. 60/753,183,filed Dec. 22, 2005, the complete contents of each of which isincorporated herein by reference.

BACKGROUND

1. Field of the Invention

The present invention generally relates to management of securitiesportfolios used to provide distributions to retirees or to trust incomebeneficiaries. More specifically, the present invention relates to usingcredit lines to enhance the durability and increase the yield of theseportfolios.

2. Related Art

For many current and soon-to-be retirees, social security benefits aloneare not sufficient to cover all the expected expenses that are to beincurred during their retirement. For many trust income beneficiaries,increased income is desired but cannot be obtained without diminishingthe amount left for the remainder beneficiaries. In addition, theanticipated life expectancy of retirees and beneficiaries has generallyincreased due to many factors. Therefore, retirees, beneficiaries andtrustees are facing increasing pressure to increase the yields fromtheir securities portfolios while making such portfolios last as long aspossible. Conventional home equity credit lines (and other credit lines)are sometimes used to supplement retirement income or trust income, butthere does not seem to be any systematic method to coordinate thesecredit lines with the retiree's or beneficiary's securities portfolio.Furthermore, there does not seem to be any systematic method todetermine whether or when to use a reverse mortgage to replace a homeequity credit line or other credit line. Reverse mortgages are sometimesconsidered as an alternative source of retirement distributions,although there does not seem to be any consideration of them asalternatives or supplements to trust income. In any case, conventionalwisdom holds that reverse mortgages should be used as a last resort, tobe drawn upon only after other resources, such as securities portfolios,have been largely or completely exhausted.

Hence, it would be desirable to provide a method and system to enhancethe durability and increase the yield of securities portfolios used toprovide distributions to retirees or beneficiaries, and in the case ofsuch portfolios held by trusts, to increase, or at least maintain, thevalue of the trust remainder. Furthermore, it would be desirable toinclude in the method and system a way to use various kinds of creditlines, comprising conventional home equity credit lines and reversemortgage credit lines, to provide the greatest economic advantage to theretiree or trust beneficiary while also providing the greatestflexibility and preservation of options for the longest period of timeduring the retiree's or beneficiary's remaining lifetime.

BRIEF DESCRIPTION OF THE DRAWINGS

FIG. 1 depicts an overview flowchart of a system for using credit linesto enhance the durability of securities portfolios.

FIG. 2, depicts an embodiment of a system for using credit lines toenhance the durability of securities portfolios.

FIG. 3 depicts an alternate embodiment of a system for using creditlines to enhance the durability of securities portfolios.

FIG. 4 depicts an alternate embodiment of a system for using creditlines to enhance the durability of securities portfolios.

FIG. 5 depicts an alternate embodiment of a system for using creditlines to enhance the durability of securities portfolios.

FIG. 6 depicts an alternate embodiment of a system for using creditlines to enhance the durability of securities portfolios.

FIG. 7 depicts an embodiment of a method for determining distributionratios.

FIG. 8 depicts an embodiment of a method for determining distributionratios.

FIG. 9 depicts an embodiment of a method for determining annual funddistribution.

FIG. 10 depicts an embodiment of a method for determining fundingsources.

FIG. 11 depicts an embodiment of a method for determining fundingsources.

FIG. 12 depicts an embodiment of a method for determining fundingallocation.

FIG. 13 depicts an embodiment of a method for evaluating anticipatedperformance accounting for variable risk aversion.

FIG. 14 depicts an embodiment of a computer system on which the methodsof FIGS. 1-13 can be implemented.

DETAILED DESCRIPTION

FIG. 1 depicts an embodiment of a system 100 for determining anappropriate source or sources of funds for a desired purpose. In theembodiment shown in FIG. 1, in step 102, information regarding aportfolio can be gathered. Such information can include types andquantities of stocks, bonds, bank accounts and/or any other securityand/or financial record and/or financial vessel.

In step 104, home value information can be gathered. Home valueinformation can include any relevant information concerning the marketvalue of a person's home and/or homes. Such information can includeestimated market value, cost, current loan balances secured by the home,and/or any other financial data related to the home.

In step 106, user information can be gathered. User information caninclude any relevant information regarding the user and/or the user'sspouse. In some embodiments the information can include, age, gender,current assets (both liquid and non-liquid), anticipated life span,current spending habits, desired duration of funds, total net worth,health, anticipated problems and/or expenses, and/or any other desiredinformation regarding the user and/or the user's spouse.

In step 108, the information gathered in steps 102, 104 and 106 can becombined in any known and/or convenient manner to determine the baseannual funds desired by a user and/or his/her spouse. In one embodimenta simple percentage of current spending can be used. However, inalternate embodiments any known and/or convenient system and/or methodcan be used to determine the base annual funds desired. Moreover, insome embodiments, the determination of base annual funds desired can bearbitrarily selected without reference to one or more of the sets ofinformation gathered in steps 102, 104 and/or 106.

In step 110, the system 100 can gather information regarding performancehistory and projected performance of the portfolio and/or any/all of itsconstituent members. Such information can be obtained in any knownand/or convenient manner. In some embodiments, the information can bemanually obtained/entered and/or it can be automatically retrieved.Moreover, in some embodiments, the information can be estimated.

In step 112, the system 100 can gather information regarding interestrates and inflation rates. Such information can be obtained in any knownand/or convenient manner. In some embodiments, the information can bemanually obtained/entered and/or it can be automatically retrieved.Moreover, in some embodiments, the information can be estimated.

In step 114, the system 100 can determine the appropriate source orsources from which a user should draw funds to meet the annual fundsdesired. The system 100 can employ any known and/or convenient systemand/or method to determine the appropriate funds sources. In someembodiments, the system 100 can base funding source decisions onpast/present financial performance, predicted financial performance,past/current interest rates, predicted interest rates, past/currentinflation rates, predicted inflation rates and/or any other desiredcriterion and/or criteria.

In step 116, funds can be transferred from the desired funding sources.Such transfers can be performed in any known and/or convenient manner.In some embodiments, the user and/or his/her agent can cause thetransfer(s) to be implemented. However, in alternate embodiments, thesystem 100 can automatically cause the desired transfer(s) to beimplemented.

FIG. 2 depicts an alternate embodiment of the system 100 described inFIG. 1. In the embodiment shown in FIG. 2, inflation data 202,disbursement adjustment data 204, securities portfolio data 206 andreverse mortgage data 208 can be gathered and delivered to adistribution analysis engine 210. In some embodiments the data 202, 204,206, 208 can be manually entered and/or can be automatically gathered.However, in alternate embodiments, the data 202, 204, 206, 208 can becollected and delivered to the distribution analysis engine 210 in anyknown and/or convenient manner.

In the embodiment shown in FIG. 2, the distribution analysis engine 210determines whether funds should be disbursed from the securitiesportfolio, from the reverse mortgage and/or both. In some embodiments,the analysis can make this determination based solely on the historicalprofitability of the securities portfolio 206, based on the availablecredit under the reverse mortgage 208 and/or a combination of any known,obtainable and/or convenient information. Any known and/or convenientsystem and/or method to determine appropriate allocation of funds can beused.

Upon determination of the appropriate source(s) of funds, funds can bedisbursed and the securities data can be updated 212 and/or the reversemortgage data can be updated 214, depending upon the source of the fundsand the funds can be delivered to recipient.

Additionally, in some embodiments, the recipient 216 can update thedisbursement adjustment data 204 and the cycle can be repeated. Thecycle can be repeated at any convenient intervals. In some embodiments,the interval can be one year, one month, one week, one day and/or anyother convenient and/or desired interval.

As shown in FIG. 3, the system 100 includes a securities portfolio 308owned by a retiree or trust income beneficiary 302, a line of credit 304secured by the retiree's or trust income beneficiary's home (i.e., aconventional home equity line of credit), or by other assets, or by areverse mortgage on the retiree's or income beneficiary's principal orsecondary residence, and an analyzer 310.

The retiree or trust income beneficiary 302 receives distributions,generally in regular periodic amounts. The amounts of thesedistributions will typically be adjusted at regular intervals (annually,quarterly or at some other frequency) for inflation, but will not beadjusted for the investment performance of the portfolio. The source ofthese distributions will be the securities portfolio 308, or the line ofcredit 306, or both, in proportions determined by the analyzer 310, atthe beginning of each time period. The term “time period” as used hereand elsewhere in this application means a year, a quarter, or any otherpredetermined time period.

The analyzer 310 determines the proportions, as between the securitiesportfolio 308 and the line of credit 306, on the basis of information itreceives. The analyzer 310 receives various types of informationcomprising, for example, investment performance of the securitiesportfolio 308 during the preceding time period, the inflation-adjustedamounts to be paid to the retiree or beneficiary 302 as distributionsduring the current time period, and the limits on the amount that can bedrawn from the line of credit 306 during the current time period.Furthermore, additional information that may be used by the analyzer 310includes the required minimum distribution, if the securities portfolio308 is in a 401(k) account or an individual retirement account (“IRA”),information about the retiree's tax bracket, etc.

In one aspect, the analyzer 310 makes its determination as follows. Atthe beginning of each time period, the investment performance of thesecurities portfolio 308 for the preceding time period is examined. Ifthe performance is negative, the current time period's distributions arethen to be made entirely from the line of credit 306. Notwithstandingthe foregoing determination, however, if the amount available from theline of credit 306 is insufficient to make the entire payment, then onlythe amount that is available from the line of credit 306 is to be used,and the remainder of the payments are to be made from the securitiesportfolio 308.

On the other hand, if the investment performance of the securitiesportfolio 308 is positive, and the amount of investment return isgreater than or equal to the current time period's distribution, thecurrent time period's distribution is then to be made entirely from thesecurities portfolio 308.

If the investment performance of the securities portfolio 308 ispositive, but the amount of the investment return is less than theamount of the current time period's distribution, the amount of theinvestment return is drawn from the securities portfolio 308, and theremainder of the time period's distribution is drawn from the line ofcredit 306 (subject to the availability of the line of credit 306 asnoted above).

The analyzer 310 has an additional function, which is described asfollows. In most cases in which the present invention would be used, theline of credit to be drawn from in the early years of the retiree'sretirement or the trust beneficiary's tenure would be a conventionalhome equity line of credit (often referred to as a “HELOC”). That isbecause the typical HELOC has a lower interest rate and lower initialfee than a reverse mortgage line of credit. However, a HELOC generallyhas a limited duration and a limit on the amount that can be borrowed.When either limit is reached, repayment of the credit line debt isgenerally required to begin.

The obligation to repay the credit line debt could impose an economicburden on the retiree or trust beneficiary, which might force him or herto sell the home. An alternative to selling the home would be the use ofa reverse mortgage to replace the HELOC, as a so-called “take-out” loan.(A reverse mortgage requires no repayment so long as the borrowercontinues to occupy the home.) Generally, the maximum amount that can beborrowed under a reverse mortgage is substantially lower than the amountthat can be borrowed under a HELOC. Therefore, if the retiree or trustbeneficiary desires to use a reverse mortgage to replace the HELOC, thatdecision would have to be made at or before the time that the HELOC debtreaches the maximum amount available under the reverse mortgage. Thatamount, however, changes over time; it is a function of the borrower'sage and of the value of his or her home at the time the reverse mortgageis taken. Thus, as part of the additional function of the analyzer 310,the analyzer 310 regularly receives information about the amount of theoutstanding HELOC debt, and about the value of the retiree's or trustbeneficiary's home. The analyzer 310 then uses the information about ageand home value to obtain information on the maximum amount available tothe retiree or trust beneficiary from a reverse mortgage. The analyzer310 also tracks, on a regular periodic basis, the amount of theoutstanding HELOC debt. Whenever the amount of the outstanding HELOCdebt approaches a predetermined percentage of the maximum amountavailable under a reverse mortgage, the analyzer 310 informs the retireeor trust beneficiary and/or his or her financial advisor. The retiree ortrust beneficiary, and/or his or her financial advisor can then examinethe overall financial situation and decide on the appropriate course ofaction.

As described above, the present invention uses the line of credit 306coordinated with the securities portfolio 308, rather than separatefrom, or after the exhaustion of, the securities portfolio 308. The useof a line of credit 306 coordinated with a securities portfolio 308 canhave exceptionally favorable results in enhancing the durability andvalue of the securities portfolio 308 in later years. This is especiallytrue if it is used in situations where the securities portfolio 308 hasnegative investment performance during the early years of a retiree'sretirement, or trust beneficiary's tenure.

There are significant advantages to using a HELOC, rather than a reversemortgage, in the early years of the retiree's retirement or the trustbeneficiary's tenure. The HELOC's lower interest rate and lower initialfee have the result that the cumulative debt against the borrower's homewill be lower at any future time than if a reverse mortgage had beentaken instead of the HELOC. It is very likely that there would be manyyears in the time period before the cumulative debt under the HELOCwould reach the maximum amount available under a reverse mortgage.During the intervening time period, several options remain open. And,even if the HELOC is replaced by a reverse mortgage at the end of suchtime period, the cumulative debt will be significantly lower than if thereverse mortgage (instead of the HELOC) were taken initially.

In one implementation, the present invention is implemented usingsoftware in the form of control logic, in either an integrated or amodular manner. The control logic may reside on a computer-readablemedium executable by a computer or processor. Alternatively, hardware ora combination of software and hardware can also be used to implement thepresent invention. Based on the disclosure and teachings providedherein, a person of ordinary skill in the art will know of other waysand/or methods to implement the present invention.

FIG. 4 depicts an alternate embodiment of the system 100 described inFIG. 2. In the embodiment shown in FIG. 4, inflation data 202,disbursement adjustment data 204, securities portfolio data 206, reversemortgage data 208 and HELOC data 402 can be gathered and delivered to adistribution analysis engine 210. In some embodiments the data 202, 204,206, 208, 402 can be manually entered and/or can be automaticallygathered. However, in alternate embodiment, the data 202, 204, 206, 208,402 can be collected and delivered to the distribution analysis engine210 in any known and/or convenient manner.

In the embodiment shown in FIG. 4, the distribution analysis engine 210determines whether funds should be disbursed from the securitiesportfolio, from the reverse mortgage, the HELOC and/or any two or moreof them. In some embodiments, the distribution analysis engine can makethis determination based solely on the historical profitability of thesecurities portfolio 206, based on the available credit under thereverse mortgage 208, based solely upon relative interest rates of thereverse mortgage 208 and the HELOC, based solely upon available creditunder the HELOC and/or a combination of any known, obtainable and/orconvenient information related to one or more of the securitiesportfolio data 206, reverse mortgage data 208 and the HELOC data 402.Any known and/or convenient system and/or method to determineappropriate allocation of funds can be used.

Upon determination of the appropriate source(s) of funds, funds can bedisbursed and the securities data can be updated 212, the reversemortgage data can be updated 214, and/or the HELOC data can be updated404, depending upon the source of the funds and the funds can bedelivered to recipient.

Additionally, in some embodiments, the recipient 216 can update thedisbursement adjustment data 204 and the cycle can be repeated. Thecycle can be repeated at any convenient intervals. In some embodiments,the interval can be one year, one month, one week, one day and/or anyother convenient and/or desired interval.

FIG. 5 depicts an alternate embodiment of the system 100 described inFIG. 4. In the embodiment shown in FIG. 5, inflation data 202,disbursement adjustment data 204, securities portfolio data 206, reversemortgage data 208 and HELOC data 402 can be gathered and delivered to adistribution analysis engine 210. In some embodiments the data 202, 204,206, 208, 402 can be manually entered and/or can be automaticallygathered. However, in alternate embodiments, the data 202, 204, 206,208, 402 can be collected and delivered to the distribution analysisengine 210 in any known and/or convenient manner.

In the embodiment shown in FIG. 5, the distribution analysis engine 210determines whether funds should be disbursed from the securitiesportfolio, from the reverse mortgage, the HELOC and/or any two or moreof them and whether funds should be transferred between the securitiesportfolio 206, reverse mortgage 208 and/or HELOC 402. In someembodiments, the analysis can make these determination based solely onthe historical profitability of the securities portfolio 206, based onthe available credit under the reverse mortgage 208, based solely uponrelative interest rates of the reverse mortgage 208 and the HELOC, basedsolely upon available credit under the HELOC and/or a combination of anyknown, obtainable and/or convenient information related to one or moreof the securities portfolio data 206, reverse mortgage data 208 and theHELOC data 402. Any known and/or convenient system and/or method todetermine appropriate allocation of funds can be used.

Upon determination of the appropriate source(s) of funds, funds can bedisbursed and/or transferred and the securities data can be updated 212,the reverse mortgage data can be updated 214, and/or the HELOC data canbe updated 404, depending upon the source of the funds and the funds canbe delivered to the recipient.

Additionally, in some embodiments, the recipient 216 can update thedisbursement adjustment data 204 and the cycle can be repeated. Thecycle can be repeated at any convenient intervals. In some embodiments,the interval can be one year, one month, one week, one day and/or anyother convenient and/or desired interval.

FIG. 6 depicts an alternate embodiment of the system 100 described inFIG. 4. In the embodiment shown in FIG. 5, inflation data 202,disbursement adjustment data 204, securities portfolio data 206, reversemortgage data 208 and HELOC data 402 can be gathered and delivered to adistribution analysis engine 210. In some embodiments the data 202, 204,206, 208, 402 can be manually entered and/or can be automaticallygathered. However, in alternate embodiments, the data 202, 204, 206,208, 402 can be collected and delivered to the distribution analysisengine 210 in any known and/or convenient manner.

In the embodiment shown in FIG. 6, the distribution analysis engine 210determines whether funds should be disbursed from the securitiesportfolio, from the reverse mortgage, the HELOC and/or any two or moreof them and whether funds should be transferred between the securitiesportfolio 206, reverse mortgage 208 and/or HELOC 402. In someembodiments, the analysis can make these determination based solely onthe historical profitability of the securities portfolio 206, based onthe available credit under the reverse mortgage 208, based solely uponrelative interest rates of the reverse mortgage 208 and the HELOC, basedsolely upon available credit under the HELOC and/or a combination of anyknown, obtainable and/or convenient information related to one or moreof the securities portfolio data 206, reverse mortgage data 208 and theHELOC data 402. Any known and/or convenient system and/or method todetermine appropriate allocation of funds can be used.

Upon determination of the appropriate source(s) of funds, funds can bedisbursed and/or re/transferred 606 and the securities data can beupdated 212, the reverse mortgage data can be updated 604, and/or theHELOC data can be updated 404, depending upon the source of the funds,and the funds can be delivered to recipient.

Additionally, in some embodiments, the recipient 216 can update thedisbursement adjustment data 204 and the cycle can be repeated. Thecycle can be repeated at any convenient intervals. In some embodiments,the interval can be one year, one month, one week, one day and/or anyother convenient and/or desired interval.

FIG. 7 depicts an embodiment of a method for determining distributionratios. In the embodiment shown in FIG. 7, portfolio data 702 isgathered and used to calculate/predict the portfolio performance 704. Inthe embodiment shown in FIG. 7, Monte Carlo simulations can be used tocalculate predicted outcomes. However, in alternate embodiments, anyknown and/or convenient system and/or method can be employed todetermine predicted outcomes, which can be employed with any of theembodiments previously described.

In step 706, portfolio performance is evaluated over the precedingdesired interval. If portfolio performance is positive (in excess ofzero), distribution will be made from the portfolio 708 and theportfolio data will be updated 710 for use in future iterations. Ifportfolio performance is negative (zero or below zero), informationregarding the available credit line data can be obtained 712.

In step 714, the credit line data is evaluated. If the credit line data712 indicates that no credit is available, distribution of funds will bemade from the portfolio 716 and the portfolio data will be updated 718for use in future iterations.

If in step 714, the credit line data 712 indicates that credit isavailable, home data is collected and/or retrieved 720. If the sum ofthe desired distribution plus the current balance-owed on the creditline is below a predefined threshold percentage of the maximum reversemortgage available, then distribution can be made from the line ofcredit 724 and the credit line data can be updated 726 for use in futureiterations. If the sum of the desired distribution plus the currentbalance owed on the credit line meets and/or exceeds a predefinedthreshold percentage of the maximum reverse mortgage available, thenevaluation and/or use of a reverse mortgage is advised 728 and creditline data and reverse mortgage data can be updated 730 for use in futureiterations.

FIG. 8 depicts an alternate embodiment of a method for determiningdistribution ratios, which can be employed with any of the embodimentspreviously described. In the embodiment shown in FIG. 8, data regardinga distribution request 802, portfolio data 804 and credit line data 806can be retrieved. In step 808, portfolio performance can be evaluated.If portfolio performance is determined to be negative, the availablecredit in the credit line is compared 810 to the distribution request802. If the available credit exceeds the distribution request, thedistribution can be made from the credit line 812 and the credit linedata can be updated 814 for use in future iterations. If the creditavailable does not exceed the distribution request, a distribution fromthe credit line up to the maximum credit available can be made 816 andthe credit line data can be updated for use in future iterations.Additionally, a distribution can be made from the portfolio in an amountequal to the requested distribution minus the previously made creditline distribution. 820. Then, the portfolio data can be updated 822 foruse in future iterations.

If in step 808 it is determined that the portfolio exhibited positiveperformance over the preceding interval, then an evaluation 824 is madecomparing the portfolio performance to the requested distribution. Ifthe portfolio performance over the preceding interval is greater thanthe requested distribution, the distribution can be made from theportfolio 826 and the portfolio data can be updated. Additionally, anevaluation 828 can be made to determine if payment towards anoutstanding credit line is advisable. Any known and/or convenient systemand/or method can be used to determine if such a payment is advisable.

If in step 824, it is determined that the portfolio performance over thepreceding interval does not exceed the requested distribution, then allpositive performance of the portfolio is distributed 830 and theportfolio data is updated. Next, an evaluation of the available creditas compared to the requested distribution and portfolio performance isconducted 832. If the available credit is greater than the requesteddistribution minus the previously distributed positive portfolioperformance, then the balance of the requested distribution 834 can bemade from the credit line and the credit line data can be updated 818.If the credit available does not exceed the requested distribution minusthe previously distributed positive portfolio performance, then theremaining credit on the credit line (up to the maximum credit limit) canbe distributed 836 and the credit line data can be updated 818.Additionally, the balance of the distribution (requested distributionminus distribution from credit line minus previous distribution fromportfolio of positive performance) can be made from the portfolio 838and the portfolio data can be updated for future use 822.

FIG. 9 depicts an embodiment of a method for determining annual funddistribution. In the embodiment shown in FIG. 9, various information isgathered comprising: Age 902, Spouse's age 904, First distribution data906, User Spending data 908 and User risk aversion data 910. Firstdistribution data 906 can be information relating to any previousdistributions and/or a desired first distribution amount. User spendingdata 908 can be based on any user input, an average of user's previousspending and/or can be based on any known and/or convenient input. Userrisk aversion data 910 can be determined in any know and/or convenientmanner, such as questionnaire results and/or direct inquiry.

The gathered data 902, 904, 906, 908, 910 can then be combined withduration data 912 (related to the desired outlook period), inflationdata and predictions 914 and portfolio performance data and predictions916 to determine 918 a probability that a user's portfolio would beexhausted over the duration based on the spending data as influenced byvarious market factors. Based on the determined probability ofexhaustion 918, any known and/or convenient method and/or system can beemployed to determine a desired annual fund distribution 920.

FIG. 10 depicts an embodiment of a method for determining fundingsources. In step 1002 HELOC data is obtained and a determination 1004 ismade as to whether, based on the terms of the HELOC, the HELOC balanceis due. If the evaluation reveals that the HELOC balance is due, anevaluation 1006 is performed to determine if repayment and/orrefinancing of the HELOC to a reverse mortgage could be appropriate. Instep 1008, the HELOC balance is evaluated to determine if it below themaximum available reverse mortgage. If the HELOC balance is at or belowthe maximum available reverse mortgage, then refinancing the HELOC to areverse mortgage is indicated 1010 as appropriate. If the HELOC balanceis above the maximum available reverse mortgage, then maintaining theexisting HELOC 1012 and making appropriate payment on the HELOC isindicated as appropriate.

If in step 1004 it is determined that the HELOC is not currently due,then portfolio data 1014 is retrieved and an evaluation is made in step1016 to determine if the positive portfolio performance during thepreceding interval is greater than the HELOC debt service plus thedesired distribution. If the positive portfolio performance during thepreceding interval is greater than the HELOC debt service plus thedesired distribution, then the system can indicate that maintenance ofthe HELOC is indicated and that payments towards the HELOC could beadvisable 1018. If the positive portfolio performance during thepreceding interval is not greater than the HELOC debt service plus thedesired distribution, then the system can evaluate 1020 the options ofrepaying the HELOC and refinancing the HELOC by a reverse mortgage. Instep 1022 it is determined whether a user intends to remain in the homesubject to the HELOC. If the user does not intend to remain in the home,then maintenance of the HELOC is advisable 1024. If the user intends toremain in the home, then refinancing the HELOC by a reverse mortgage isindicated as advisable 1026.

FIG. 11 depicts an alternate embodiment of a method for determiningfunding sources. In step 1102, HELOC data is collected and in step 1104the HELOC data is evaluated against the maximum reverse mortgageavailable. If the HELOC balance is greater than a predefined percentageof the maximum reverse mortgage available, then maintenance of the HELOCis indicated as advisable 1106. If in step 1104 it is determined thatthe HELOC balance is at or below a predefined percentage of the maximumavailable reverse mortgage, then a second evaluation in step 1108 can betriggered.

In step 1108, the portfolio performance is compared with the HELOC debtservice plus the desired distribution. If portfolio performance isgreater than the HELOC debt service plus the desired distribution, itcan be indicated that maintenance of the HELOC 1110 and possible payingdown of the HELOC is advisable. If portfolio performance is not greaterthan the HELOC debt service plus the desired distribution, then thesystem can evaluate 1112 the options of repaying the HELOC andrefinancing the HELOC by a reverse mortgage. In step 1114 it isdetermined whether a user intends to remain in the home subject to theHELOC. If the user does not intend to remain in the home, thenmaintenance of the HELOC is advisable 1116. If the user intends toremain in the home, then refinancing the HELOC by a reverse mortgage isindicated as advisable 118.

FIG. 12 depicts an embodiment of a method for determining fundingallocation. In step 1202 the maximum available reverse mortgage iscompared with the HELOC balance. If a predetermined percentage of themaximum available reverse mortgage is greater than the HELOC balance,then maintenance of the HELOC 1204 is indicated as advisable. If apredetermined percentage of the maximum available reverse mortgage isnot greater than the HELOC balance, then the system can evaluate 1206the anticipated portfolio performance as compared to the projecteddistribution. If the anticipated portfolio performance is greater thanthe projected need, then the system can advise that paying down theHELOC 1208 is indicated as advisable. If the anticipated portfolioperformance is not greater than the projected need, then the system canadvise that refinancing of the HELOC by a reverse mortgage 1210 isindicated as advisable.

FIG. 13 depicts an embodiment of a method for evaluating anticipatedperformance accounting for variable risk aversion. In the embodimentshown in FIG. 13, various data is collected and/or generated,comprising: portfolio data 1302, risk aversion data 1304, personal data1306 and age data 1308. Based on the input data 1302, 1304, 1306, 1308,an evaluation can be conducted using any known and/or convenient systemand/or method to determine an appropriate distribution of assets withinthe portfolio 1310. The system can then conduct analyses to determine ananticipated portfolio performance. Such analyses can be performed usingany known and/or convenient system and/or method of evaluation and theresults can be used to update portfolio data and/or risk aversion data,which may be associated with age and the analyses can then be repeatedwith the updated values.

In operation, the system can be embodied in a spreadsheet andimplemented in, at least, the following manner (this example is intendedto be illustrative only and should not be construed as limiting in anymanner):

Each row in the spreadsheet represents a year. The model assumes thatthe initial year's income draw, and each subsequent year's income draw,occurs on the last day of the year. The amount of each year's incomedraw is based entirely on the financial events that took place duringthat year.

One of the inputs to the model is the initial value of the portfolio andthe asset allocation of the portfolio. During the year, the portfoliohas investment gain or loss based on the investment performance of itsassets. The performance of the assets during the year is Monte Carlosimulated, on the basis of historical data about the performance of theassets that make up the portfolio, and, to the extent desired by theIncome Recipient or the financial planner, on the basis of any otherassumptions they make. As of the end of the year, the portfolio'ssimulated gain or loss is determined.

Another of the inputs to the model is the amount of the initial incomedraw. The model determines whether the portfolio's simulated investmentreturn is positive or negative, and if positive, it determines theamount of the investment return.

If the investment return is positive, and the amount of the investmentreturn is at least equal to the amount of the year's income draw, theincome is drawn from the portfolio. In that case, the model has theportfolio's value reduced by the amount of the income draw.

If the investment return is negative, the model has the amount of theincome draw taken from the credit line. In that case, the model does nothave the portfolio's value reduced by the amount of the income draw, butit does have the amount of the credit line debt increased by the valueof the income draw.

The model has this process continue for each year represented by a rowin the spreadsheet. For each such year, the amount of the income draw isequal to the previous year's income draw, but increased for inflation.The rate of inflation is Monte Carlo simulated, of the basis ofhistorical data, and, if desired by the Income Recipient or thefinancial planner, on the basis of any other assumptions they make.

The model also adds interest to the credit line debt, at a ratedetermined as an input or at a rate correlated with the interest MonteCarlo simulated for the short term bond portion of the portfolio.

The model tracks the portfolio's value through the sequence of years,and notes its value at the end of numbers of years selected by theIncome Recipient, e.g., 20 years, 25 years, 30 years and 35 years.

In typical Monte Carlo simulation fashion, the System runs hundreds orthousands of spreadsheets in a few minutes and shows the number of themthat have portfolio values in stated ranges, at the end of each of thechosen duration periods. The number of them that have portfolio valuesat or near zero, divided by the total number of spreadsheets run, givesthe probability of portfolio exhaustion.

The model also tracks the Income Recipient's “residual net worth”through the same time periods. The “residual net worth” in this contextis defined as the value of the portfolio plus the value of the home(assumed to increase at an average rate that is another input) minus thecumulative credit line debt.

The model also has an algorithm that takes as input the total amountallowable as a reverse mortgage, as a function of the age of the IncomeRecipient. For each year in a spreadsheet run, it compares the amount ofcumulative credit line debt against the amount available as a reversemortgage at the age which the Income Recipient would have attained inthe year when the credit line should be refinanced or paid off, analyzesthe amount available in the portfolio, and “decides” whether there aresufficient assets in the portfolio to pay off the credit line and stillcontinue the income draws at the anticipated rate. If there are notsufficient assets, the program “decides” to refinance the credit linewith a reverse mortgage, and then uses the reverse mortgage interestrate (plus initial fee) in determining the cumulative debt.

The model also runs a parallel program, identical to what has beendescribed above, but with the addition of an algorithm which reviews thecumulative investment return of the portfolio for a recent period of apredetermined number of years, and if it is greater than a predeterminedamount, the excess is used to pay down the cumulative credit line debt.The probabilities of portfolio exhaustion, and the Income Recipient'sresidual net worth, with and without the use of the algorithm arecompared.

The model also runs a parallel program, identical to what has beendescribed above, but with the addition of an algorithm that shifts theasset allocation from one that is predominantly equities to one that ispredominantly fixed income securities as the Income Recipient ages. Theprobabilities of portfolio exhaustion, and the Income Recipient'sresidual net worth, with and without the use of the algorithm arecompared.

The execution of the sequences of instructions required to practice theembodiments may be performed by a computer system 1400 as shown in FIG.14. In an embodiment, execution of the sequences of instructions isperformed by a single computer system 1400. According to otherembodiments, two or more computer systems 1400 coupled by acommunication link 1415 may perform the sequence of instructions incoordination with one another. Although a description of only onecomputer system 1400 will be presented below, however, it should beunderstood that any number of computer systems 1400 may be employed topractice the embodiments.

A computer system 1400 according to an embodiment will now be describedwith reference to FIG. 14, which is a block diagram of the functionalcomponents of a computer system 1400. As used herein, the term computersystem 1400 is broadly used to describe any computing device that canstore and independently run one or more programs.

Each computer system 1400 may include a communication interface 1414coupled to the bus 1406. The communication interface 1414 providestwo-way communication between computer systems 1400. The communicationinterface 1414 of a respective computer system 1400 transmits andreceives electrical, electromagnetic or optical signals, that includedata streams representing various types of signal information, e.g.,instructions, messages and data. A communication link 1415 links onecomputer system 1400 with another computer system 1400. For example, thecommunication link 1415 may be a LAN, in which case the communicationinterface 1414 may be a LAN card, or the communication link 1415 may bea PSTN, in which case the communication interface 1414 may be anintegrated services digital network (ISDN) card or a modem, or thecommunication link 1415 may be the Internet, in which case thecommunication interface 1414 may be a dial-up, cable or wireless modem.

A computer system 1400 may transmit and receive messages, data, andinstructions, comprising program, i.e., application, code, through itsrespective communication link 1415 and communication interface 1414.Received program code may be executed by the respective processor(s)1407 as it is received, and/or stored in the storage device 1410, orother associated non-volatile media, for later execution.

In an embodiment, the computer system 1400 operates in conjunction witha data storage system 1431, e.g., a data storage system 1431 thatcontains a database 1432 that is readily accessible by the computersystem 1400. The computer system 1400 communicates with the data storagesystem 1431 through a data interface 1433. A data interface 1433, whichis coupled to the bus 1406, transmits and receives electrical,electromagnetic or optical signals, that include data streamsrepresenting various types of signal information, e.g., instructions,messages and data. In embodiments, the functions of the data interface1433 may be performed by the communication interface 1414.

Computer system 1400 includes a bus 1406 or other communicationmechanism for communicating instructions, messages and data,collectively, information, and one or more processors 1407 coupled withthe bus 1406 for processing information. Computer system 1400 alsoincludes a main memory 1408, such as a random access memory (RAM) orother dynamic storage device, coupled to the bus 1406 for storingdynamic data and instructions to be executed by the processor(s) 1407.The main memory 1408 also may be used for storing temporary data, i.e.,variables, or other intermediate information during execution ofinstructions by the processor(s) 1407.

The computer system 1400 may further include a read only memory (ROM)1409 or other static storage device coupled to the bus 1406 for storingstatic data and instructions for the processor(s) 1407. A storage device1410, such as a magnetic disk or optical disk, may also be provided andcoupled to the bus 1406 for storing data and instructions for theprocessor(s) 1407.

A computer system 1400 may be coupled via the bus 1406 to a displaydevice 1411, such as, but not limited to, a cathode ray tube (CRT), fordisplaying information to a user. An input device 1412, e.g.,alphanumeric and other keys, is coupled to the bus 1406 forcommunicating information and command selections to the processor(s)1407.

According to one embodiment, an individual computer system 1400 performsspecific operations by their respective processor(s) 1407 executing oneor more sequences of one or more instructions contained in the mainmemory 1408. Such instructions may be read into the main memory 1408from another computer-usable medium, such as the ROM 1409 or the storagedevice 1410. Execution of the sequences of instructions contained in themain memory 1408 causes the processor(s) 1407 to perform the processesdescribed herein. In alternative embodiments, hard-wired circuitry maybe used in place of or in combination with software instructions. Thus,embodiments are not limited to any specific combination of hardwarecircuitry and/or software.

The term “computer-usable medium,” as used herein, refers to any mediumthat provides information or is usable by the processor(s) 1407. Such amedium may take many forms, comprising, but not limited to,non-volatile, volatile and transmission media. Non-volatile media, i.e.,media that can retain information in the absence of power, includes theROM 1409, CD ROM, magnetic tape, and magnetic discs. Volatile media,i.e., media that can not retain information in the absence of power,includes the main memory 1408. Transmission media includes coaxialcables, copper wire and fiber optics, comprising the wires that comprisethe bus 1406. Transmission media can also take the form of carrierwaves; i.e., electromagnetic waves that can be modulated, as infrequency, amplitude or phase, to transmit information signals.Additionally, transmission media can take the form of acoustic or lightwaves, such as those generated during radio wave and infrared datacommunications.

In the foregoing specification, the embodiments have been described withreference to specific elements thereof. It will, however, be evidentthat various modifications and changes may be made thereto withoutdeparting from the broader spirit and scope of the embodiments. Forexample, the reader is to understand that the specific ordering andcombination of process actions shown in the process flow diagramsdescribed herein is merely illustrative, and that using different oradditional process actions, or a different combination or ordering ofprocess actions can be used to enact the embodiments. Additionally, itwill be apparent to those skilled in the art that the various componentsand systems described can be implemented in conjunction with each otherand can be combined to create various systems operating in numerousmanners and modes. The specification and drawings are, accordingly, tobe regarded in an illustrative rather than restrictive sense.

1. A financial computing tool, comprising: a microprocessor coupled witha memory, an input, and an output; wherein said memory receives userdata, home value data, portfolio data, and performance data; whereinsaid microprocessor determines a desired fund amount in response to atleast one of said user data, said home value data, and said portfoliodata stored in said memory; wherein said desired fund amount isdetermined by calculating a maximum available reverse-mortgage amount;calculating a base value based upon said portfolio data; calculating acurrent value based upon said portfolio data; wherein said memoryreceives said desired fund amount data; wherein said microprocessordetermines at least one desired funding source in response, at least inpart, to said desired fund amount data and said desired performance datastored in said memory wherein said desired funding source is determinedby: determining whether said desired funding amount exceeds thedifference between said current value based upon said portfolio data andsaid base value based upon said portfolio data; and determining whethersaid desired funding amount exceeds the sum of the difference betweensaid current value based upon said portfolio data and said base valuebased upon said portfolio data and said maximum availablereverse-mortgage amount.
 2. The tool of claim 1 wherein saidmicroprocessor determines available funds from a real-property-securedcredit line in response to said user data and said home value datastored in said memory, and wherein said memory receives said availablefunds data.
 3. The tool of claim 2 wherein said memory receives fundingdata based on obtaining funding from at least one of a loan related tosaid real-property-secured credit line and liquidation of at least aportion of a portfolio associated with said portfolio data stored insaid memory; wherein said microprocessor determines a predicted impacton future net worth in response to said funding data stored in saidmemory; wherein said microprocessor determines which funding sourceresults in the smallest reduction on future net worth, in response tosaid funding data stored in said memory.
 4. The tool of claim 2, whereinsaid real-property-secured credit line is a reverse mortgage; andwherein said home value data is comprised of a predicted current homesale price and a user's equity in the home.
 5. The tool of claim 4,wherein the maximum loan available under said reverse mortgage isproportional to an age obtained from said user data.
 6. A method ofselecting a retirement income funding source, comprising: receiving userdata; receiving home value data; receiving portfolio data; receivingperformance data; determining a desired fund amount based on at leastone of said user data, said home value data and said portfolio data;wherein said desired fund amount is determined by: calculating a maximumavailable reverse-mortgage amount; calculating a base value based uponsaid portfolio data; calculating a current value based upon saidportfolio data; determining at least one desired funding source based,at least in part, on said desired fund amount and said performance data;determining an advised amount of funding to withdraw from each of theportfolios associated with said portfolio data and at least one of areverse mortgage and a home equity line of credit by: determiningwhether said desired funding amount exceeds the difference between saidcurrent value based upon said portfolio data and said base value basedupon said portfolio data; and determining whether said desired fundingamount exceeds the sum of the difference between said current valuebased upon said portfolio data and said base value based upon saidportfolio data and said maximum available reverse-mortgage amount; anddistributing said advised amount of funding to withdraw.
 7. The methodof claim 6 further comprising: determining available funds from areal-property secured credit line, based on said user data and said homevalue data.
 8. The method of claim 7 further comprising: determining apredicted impact on future net worth based upon obtaining funding fromat least one of a loan related to said real-property-secured credit lineand liquidation of at least a portion of a portfolio associated withsaid portfolio data; and obtaining funds from at least one of said loanand liquidation of at least a portion of said portfolio, such thatobtaining funds results in the smallest reduction on future net worth.9. The method of claim 7, wherein said real-property-secured credit lineis a reverse mortgage; and wherein said home value data is comprised ofa predicted current home sale price and a user's equity in the home. 10.The method of claim 8, wherein the maximum loan available under saidreverse mortgage is proportional to an age obtained from said user data.